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Schroders Global Investment Trends Survey 2015

Over-confidence amongst retail investors globally with majority expecting a return of 12% over the next year.

13/05/2015

The Schroders Global Investment Trends Survey 2015:

Over-confidence amongst retail investors globally with majority expecting a return of 12% over the next year

Disconnect between retail investors’ expected returns and their attitudes to investment risk, with relatively few planning to seek professional advice

Thirst for income: with low interest rates continuing to dominate, 87% of retail investors are looking to invest in assets to generate income

13 May 2015 – Over half (54%) of retail investors globally feel more confident about investment opportunities in the next 12 months than they did a year ago, according to the Schroders Global Investment Trends Survey 2015. Nine-in-ten (91%) investors across the globe expect to see their investments grow over the next 12 months. Globally, retail investors are expecting a challenging average return of 12% over this period.

Increased appetite for investmentsThe study, commissioned by Schroders amongst over 20,000 retail investors in 28 countries, shows an increasing appetite for financial investments compared to previous years. Half (50%) of those questioned intend to increase the amount they save or invest in the coming 12 months, compared to just 43% of those questioned in 2014 and 38% of those polled in 2013. On average, investors plan to increase the amount they save or invest by 8.5% over the next year. Overall, 87% of investors worldwide are looking to generate an income from their investments.

Disconnect between expected returns and attitude to riskAlmost nine-in-ten (88%) retail investors said they made a profit from their investments in the past 12 months, with average gains of 10%, and 5% reported a loss. In comparison, investors polled two years ago reported making an average loss of 4.6% since the recession.

However, despite the high levels of confidence being reported this year and optimistic expectations of double-digit returns in the next 12 months, the Schroders survey reveals a significant disconnect between expected returns and the appetite that investors have for risk, with many favouring shorter-term and lower risk investments.

Typically, retail investors are looking to place only around 21% of their investment portfolio in higher risk / higher return assets such as equities, with 45% of investors’ funds going to low risk / low return assets such as cash and around a third (35%) being placed in medium risk assets such as bonds. The data shows a bias towards short-term investing, with almost half (46%) preferring outcomes within one to two years.

Despite this disconnect, less than a quarter (23%) of retail investors polled will change their strategy by seeking professional financial advice, with more than a third (34%) of global investors intending to invest as they have done in previous years.

Massimo Tosato, Executive Vice Chairman, Schroders plc said:

“It’s overwhelmingly clear that the demand for income is prevalent as retail investors seek to meet various objectives such as financing their children’s education, purchasing a first home, setting up new businesses, or supplementing their existing income in retirement. The necessity and challenge to generate income from investments is strong, particularly given the global low interest rate environment.

“However, our survey highlights a clear disconnect globally between retail investors’ return expectations and their attitudes to risk. Expecting double digit returns within the next 12 months, while only placing less than a quarter (21%) of their investment portfolio in higher risk assets suggests that investors are not taking a realistic approach to investing. It’s imperative that investors shape their portfolios to balance the risk profile with the returns they are seeking, and in most cases, that will require a level of professional advice.”

Thirst for incomeGlobally Asian, UAE, South American and South African retail investors are the most focused on income investing, with more than 90% of each planning to do so, compared to more than 80% of North American, Australian and European investors. Interestingly, less UK investors (70%) plan to invest in assets to generate a regular income. Global investors are typically accessing income through funds (23%); direct equities (20%) or real estate - either as a direct investment or via real estate investment trusts or funds (10%).

Massimo Tosato concludes, “Retail investors around the world are considering income investing because of low bond and bank interest rates and the long-term and stable opportunities typically associated with dividend paying companies. They recognise the value of re-investment and portfolio growth as a cornerstone of income investing. It is also essential that retail investors diversify their investments across regions and asset classes.”

Schroders commissioned Research Plus Ltd to conduct an independent survey of 20,706 retail investors in 28 countries around the world who intend to invest at least €10,000 (or the equivalent) during the next 12 months. The survey was conducted online between 3rd - 27th March 2015 and these individuals represent the views of investors in each country involved in the survey.

This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for accounting, legal or tax advice, or investment recommendations. The opinions stated in this presentation include some forecasted views. We believe that we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee that any forecast or opinions will be realized.

Schroders plcSchroders is a global asset management company with £319.5 billion (EUR441.6 billion/$474.3 billion) under management as at 31 March 2015. Our clients are major financial institutions including pension funds, banks and insurance companies, local and public authorities, governments, charities, high net worth individuals and retail investors.

With one of the largest networks of offices of any dedicated asset management company, we operate from 37 offices in 27 countries across Europe, the Americas, Asia and the Middle East. Schroders has developed under stable ownership for over 200 years and long-term thinking governs our approach to investing, building client relationships and growing our business.

Further information about Schroders can be found at www.schroders.com. Issued by Schroder Investment Management Ltd, which is authorised and regulated by the Financial Conduct Authority. For regular updates by e-mail please register online at www.schroders.com for our alerting service.